Quiz 27: Liability, Defenses, and Discharge


HDC Ethics v. Enforceability: Unfortunately there will be people who suffer at the hands of unscrupulous individuals. Part of the law puts the onus of reasonable standard upon every party to a transaction. It would be less fair for a holder in due course to be denied the opportunity to collect payment. The burden falls on the party that was in the best position to prevent the loss. In all cases that is the most fair. Currently a court determines liability under the UCC and alternate statutes for varying issues. Unless the onus of responsibility is shifted entirely upon one party, there will always be discrepancies regarding intent. We use the best system available to us as citizens of the United States. .

Forged Signatures: In the case of Roy Supply, Inc. v. Wells Fargo Bank , 39 Cal.App.4 th 1051, 46 Cal.Rptr.2d 309 (1995), the court found in favor of Wells. The appeals court reversed the judgment of dismissal and remanded with directions that Roy may amend its complaint regarding timeliness. The court determined that under the UCC 4-406 , Roy had a duty to timely inform the bank of the forgeries. Roy did not meet the duty to inform the bank and subsequently lost its standing to claim negligence for payment of forged checks. Hence, Roy is liable for the amount of the forged checks.

UCC 4-403(b) According to this section; a customer can stop the payment of its check by making a written order. The order is effective for following time periods: 1) When the order is in written form; it is effective for six months. 2) When the order is in oral form; it is effective for 14 days. Within this time period, the order should be confirmed in written. R should have taken following steps to prevent the cashing of the check: 1) It should have been renewed the stop payment order for next six months. 2) The bank should have considered the check as the stale check. 3) R should have asked the S Company for not cashing the check. Since, R did not contact the S Company after issuing check; the company did not know about the stop order.

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